Inside Millennium Management: The portfolio managers' hedge fund

It's probably telling that while technology companies fall over themselves to woo staff with free food and impressive office interiors and banks are following suite, one of the world's largest hedge funds has a reputation for low-key, low maintenance office space. Portfolio managers, it seems, are not interested in aesthetics.

There are plenty of portfolio managers at Millennium Management, and their numbers are rising. The $35bn hedge fund, founded in 1989 by Israel ("Izzy) Englander is divided into 200 teams, each comprising portfolio managers, analysts and support staff. In the past two years, it's added 650 people globally, including 20 new portfolio managers. Last year alone it hired 300 people, of whom 180 were classified broadly as "investment staff."

This doesn't imply that getting into Millennium is easy. The fund doesn't run a graduate program; nor does it take investment professionals who don't have a track record. If you're a portfolio manager who wants to join Millennium, you'll need a strategy that fits the fund's parameters. You'll also need to show that you can make money - fast.

Millennium's set-up is unusual. In the words of a court document put together by then-New York attorney general Eliot Spitzer over a decade ago, Millennium operates a "master feeder" structure: money is initially placed into sub-funds and then pooled into a larger fund. Millennium settled that case and Spitzer was subsequently discredited, but Millennium's structure remains. Its 200 teams - up from around 150 in 2014 - operate entirely independently of one another, but they all feed into the same single multi-strategy fund.

Last year that fund gained almost 5%, placing Millennium in a small group that outperformed in the worst year for hedge funds since 2011. Millennium's teams pursue strategies as disparate as relative value fundamental equity, statistical arbitrage, merger arbitrage, or straight-up fixed income and commodity investing, but they all have one thing in common: they only invest in highly liquid products.

Portfolio managers who join Millennium will therefore need either to slot themselves into one of the 200 existing teams already pursuing a strategy within these parameters, or to propose a whole new one. If they opt for the latter they can expect to be quizzed at length on the validity of their idea. - Those who've been through Millennium's interviews say the process is very, very robust. If Millennium likes you, it will set them up with a whole office replete with data, analytics, and a world-class execution platform. It's the closest you can probably get to running your own fund, without all the hassle of actually doing so.

If Millennium offers restless traders and portfolio managers a taste of easy independence, it also offers them that other alluring thing: money. While other hedge funds pay staff based on 'netting' - gains net of losses - Millennium pays individual managers based on the performance of their particular team. If that team gains, they're paid proportionately, irrespective of whether another team makes a loss. In 2017 (the last year for which accounts are available), there were 12 partners at Millennium Capital Partners in the UK, each generating an average of £1.1m ($1.4m). The highest paid partner took home over £7m...

Even so, working for Millennium isn't for everyone. Around 35 people left Millennium's London office in 2018, and 25 of them have yet to resurface in registered positions in the U.K. according to the Financial Conduct Authority (FCA). The fund has a reputation for hiring people in and then spitting them out again. Five years ago, for example, Chris Dale, one of its longest serving employees, who ran one of its largest trading books in Europe, was ejected after making a 5% loss over a short period. - No matter that Dale claimed to have made $450m in the eight years previously: Englander's tolerance for losses is notoriously low. Dale subsequently launched his own fund, Kintbury Capital, which currently has seven registered employees.

Some of those who leave Millennium do so voluntarily. The fund's most notorious defector in recent years is Michael Gelband. 57 year-old Gelband was Millennium's star fixed income trader. He left in 2017 after a reported dispute with Englander. Gelband claimed to have generated $7bn in trading revenues during his tenure at Millennium and is said to have wanted a stake in the firm, which Englander wasn't prepared to give it. Gelband subsequently set up his own tellingly-named fund, ExodusPoint Capital Management, which was very busy hiring staff - including from Millennium, all of last year.

While Gelband might have disagreed with Englander's refusal to give him a big stake in Milennium, he seems to have agreed with other elements of his ex-boss's approach. ExodusPoint is said to be mimicking Millennium's structure of running independent teams that eat what they individually kill.

If this structure keeps successful portfolio managers happy, it's not always appealing to everyone else. Glassdoor has plenty of complaints from Millennium analysts and juniors who say they've been cast adrift to sink or swim ('When I say they leave you alone, I mean completely alone - there is no support whatsoever...,' is fairly typical of the griping). However, Millennium insiders also point out that the fund has absolutely no interest in its portfolio managers and their teams failing, particularly after investing heavily in setting them up. And when Millennium portfolio managers succeed and stay, they tend to stay a long time.

All of which brings us back to Millennium's offices. Last year, the firm announced plans to move to a new office in New York City sometime in 2020. When the time comes, it might be nicer there, but if you're looking for fancy premises right now Millennium may not be the place for you. - People at Millennium have taken to Glassdoor to complain that the offices are "spartan", even "gross." Ping pong tables and air hockey are not high on the agenda - if you want this kind of thing, you should probably try Two Sigma instead.

How can I get a job at Millennium Management?

If you're a portfolio manager, you'll need to prove you've got a solid track record of making money and that you can do so only by trading highly liquid products. If you're an analyst, you'll need to persuade one of Millennium's portfolio managers to hire you to his/her team. Each team is typically seven or eight people.

How much will I earn at Millennium Management?

In 2017, Millennium's UK partners each earned an average of £1.1m ($1.4m). Everyone else earns far less than this. Assistant portfolio managers can probably expect to earn around £150k.

What's good about working for Millennium Management?

Millennium operates around 200 teams, each of which is entirely independent of the rest. - If your team makes money, you'll get to share in the success - irrespective of whether other teams make a loss.

What's bad about working for Millennium Management?

Because of this independent team structure there have been complaints of a lack of support or cohesive culture across the firm. Millennium also has a notoriously low tolerance for losing money. And the offices aren't that special.

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